USD/JPY Rallies Following Improved Investor Risk Appetite
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USD/JPY Rallies Following Improved Investor Risk Appetite

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Azeez Mustapha

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The USD/JPY resumed on an upbeat momentum in the London session on Wednesday, recording a fresh monthly high at 114.33. That said, the forex pair’s bullish momentum for the second consecutive day comes as a result of several factors working together.

Firstly, the general risk tone in the market along with the Bank of Japan’s (BoJ) dovish outlook diminished the safe-haven appeal of the yen and bolstered the USD/JPY pair.

Meanwhile, fears over the superspreader Omicron variant eased a bit today following reports that existing vaccines are more effective at fighting the Omicron variant than previously believed. This development boosted investors’ confidence in the markets, driving investments away from risk-averse assets and currencies.

Furthermore, the Japanese yen got dragged down by the BoJ’s dovish stance, after the minutes from the latest BoJ policy meeting released today showed that board members supported the need to maintain an ultra-lose policy measure, considering that the 2% inflation target might not be achieved soon.

Dwindling US Treasury Yield Capping Gains for USD/JPY

On the flip side, the US dollar enjoyed some support from the Fed’s hawkish stance, following the announcement that it could implement at least three rate hikes in 2022. However, a renewed drop in the US Treasury bond yields prevented USD bulls from placing aggressive bets, capping further gains for the USD/JPY.

Moving on, market participants now await the economic releases from the US to provide some impetus for the USD/JPY pair.

 

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